What is Cost Per Thousand?
Cost per thousand or CPM is a marketing term referring to when an advertiser pays a fixed rate based on every 1,000 visits to sites showing the advertiser’s ad. (The M in the acronym refers to the roman numeral for 1,000.) These visits are also known as impressions. Some advertisers use CPM as a way to build brand recognition. With CPM, visitors’ see ads but are not directed to click or engage them in any other way. On the upside, CPM can be a good option for small businesses with tight advertising budgets because CPM is one of the least expensive forms of online advertising. But on the downside, without visitors directly engaging with the ads, advertisers see less conversions into sales. The Facebook model is a great example of effectively using CPM marketing for brand building.
How Cost Per Thousand (CPM) Works
The ad rate is fixed
The ad rate is set based on a simple calculation involving a fixed rate which is negotiated before the ad appears on the site. The advertiser pays the website publisher a rate of say, one dollar, per every 1,000 visitors or listeners that see the ad on a website. In marketing, these visitors are also known as impressions. If 1,000 impressions see the ad on a site; the advertiser owes the website publisher one dollar .If 5,000 impressions view an ad, the advertiser pays $5.00. Just by doing the math, it's easy to see how at a reduced cost, an advertiser can exponentially increase the ad's views. As a result, this helps to grow the brand.
The benefits of CPM
With so many startups and businesses getting underway on a shoestring budget, CPM can be a big money saver. Consider the benefit of placing an ad on a site that's already up and running as opposed to the cost of setting up a new site and creating new ads. With CPM, the impressions who visit a site are exposed to a single ad highlighting a brand without having any obligatory actions to complete. The advertiser benefits from lots of views and an increasing brand recognition. As a result, CPM is one of the least costly ways for any business to get exposure. By contrast, if SEO (Search Engine Optimization) triggers search engines to direct impressions to the ad on a site, the advertiser must pay larger fees based on the number of user clicks.
The disadvantages of CPM
With all the benefits to CPM marketing, there is also a downside to using this methodology. With less ad involvement, conversion rates are not as productive. It's also more difficult to track user data when impressions are not interacting with the ads. Ad engagement provides critical statistical data. Statistical information is important to advertisers because it paints a more complete picture of who lands on a site and why. Additionally, mobile phone users may have trouble seeing your ads. The larger banners that work so well on a laptop may not transfer well onto the smaller mobile phone screen.
Why Cost Per Thousand (CPM) Matters
It's a cost effective way to advertise online
Exposure is important online. Small startups can get brand recognition simply by appearing in a single ad on a web publisher's site. Because the visitor doesn't have to interact with the ad in any way, the cost is negligible, predictable and easy to handle.
It's not useful for mobile phones
Banner ads can be large and take up a great deal of space on an ad. Users with mobile phones may have trouble seeing your entire message due to lack of screen space. As a result, your fledgling campaign suffers some missed opportunities.
It's hard to gauge success
Without being able to measure interactions with your ad, you might have a harder time figuring out whether or not your ad is working. You can also leave yourself open to some fraudulent situations with hackers replicating your layout or trying to capitalize on your ideas.